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Hi
i am doing the question for audit risk and response:
Audit risk is – As the client is new and auditor does not have any full knowledge about the client,
Auditor response – Auditor to appoint right audit team with right skills and expertise on the specific areas, Is this right ? or is this a business risk?Look at page 55 of the notes. IR and CR are assessed. DR is “managed” so that AR is rendered sufficiently low. A consequence of a “poor” audit (for any reason) is that DR will not be rendered sufficiently low – this is reflected in non-sampling risk (see page 56).
So … inappropriate audit procedures increase non-sampling risk and hence increase detection risk. This risk is clearly greater for a new audit client. With successive audits, the auditor’s “cumulative audit knowledge and experience” (CAKE”) is a factor which reduces audit risk.
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